Keep Faith in Credit Card Stocks, says Nomura

By Sam Mamudi

Credit card company stocks have enjoyed a bountiful 2012, as this chart illustrates:

Not bad at all — but not the end of the story, at least according to analysts at Nomura. In a note published Monday, they argue that this year’s gains shouldn’t mean you cash out of your credit card stocks. In fact, Nomura has a Buy rating for MasterCard (MA), Discover Financial Services (DFS), Visa (V) and American Express (AXP).

Based on new price targets, the Nomura analysts foresee gains in the next 12 months of 26%, 23% 17% and 22% for each company, respectively. The reason, they argue, is less the macro picture than the companies themselves:

As we look ahead to 2013, we anticipate a tough revenue growth environment, given our outlook for rather muted spending growth and continued lack of consumer appetite for credit. The ability to grow revenues faster than expenses will be key to delivering strong performance. Both our estimates and consensus show the cards and payments stocks delivering positive operating leverage in 2013.

About Stocks To Watch

Earnings reports, corporate strategies and analyst insights are all part of what moves stocks, and they’re all covered by the Stocks to Watch blog. We also look at macro issues, investor sentiments and hidden trends that are affecting the market. Stocks to Watch gives you the full picture of the U.S. stock markets, all day long.

The blog is written by Ben Levisohn, a former stock trader who has covered financial markets for the Wall Street Journal, Bloomberg and BusinessWeek.